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Chinese revaluation may not help dollar

JUST as a growing number of European analysts have started to predict that China will move to revalue its currency later this summer, the world’s most influential central banker has dampened hopes that the move will help to address America’s twin financial deficits.

Alan Greenspan, the chairman of the US Federal Reserve, told the Economic Club of New York on Friday that a revaluation of the Chinese currency, which is currently pegged to the dollar, will not necessarily lower America’s overall trade balance. “Indeed, it’s probably quite unlikely,” he added.

Greenspan said that even if China does revalue, companies are just as likely to switch their business to other low-cost countries such as Malaysia and Thailand instead of directing business to more expensive American producers.

The United States posted a record trade deficit of $617 billion (€491 billion) in 2004. About $162 billion of that deficit was accounted for by